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EBA/ESMA Statement

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The Bank Recovery and Resolution Directive – Directive 2014/59/EU, which was transposed in Austria by the Bank Recovery and Resolution Act (BaSAG; Bankensanierungs- und Abwicklungsgesetz), introduced the possibility to make use of the bail-in instrument in the event of resolution. The Financial Market Authority, in its capacity as the national resolution authority, may now reduce the eligible liabilities of an institution, or convert them into own funds and consequently call the existing owners and creditors of an institution that is in crisis to account (bail-in).

In this context the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) issued a joint statement on 30.05.2018 – “Statement of the EBA and ESMA on the treatment of retail holdings of debt financial instruments subject to the Bank Recovery and Resolution Directive”. In this statement, institutions, supervisory and resolution authorities are instructed to appropriately take into account retail investors holding bail-inable financial instruments. When distributing bail-inable financial instruments to retail investors there are questions in particular in relation to consumer and investor protection as well as the applicability of the bail-in instrument that are relevant.

A data analysis conducted by EBA and ESMA found that retail investors, dependent on their respective Member State, hold a considerable proportion of bail-inable financial instruments. The resolution authorities should therefore take this aspect into account in their resolution planning activities and the evaluation process for potential impediments to resolution.

EBA and ESMA emphasis in the statement to inform existing clients accordingly about the bail-inable nature of the financial instruments that they hold and in the case of new issuances to implement the requirements set out in MiFID II that cover a range of provisions for increasing investor protection in an orderly manner.

The full text of the EBA/ESMA Statement can be found via the following link: https://www.esma.europa.eu/sites/default/files/library/esma71-99-991_eba_esma_statement_on_retail_holdings_of_bail-inable_debt.pdf

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